Review by Deborah Garza
This book comes at a particularly important time, as the Biden administration is tapping the brakes on the negotiation of traditional free-trade agreements and seeking to dramatically reshape U.S. competition and trade policy. In what the U.S. Trade Representative’s office heralded as a “major speech” before the Open Markets Institute in June 2023, Ambassador Tai described a “shift” in U.S. antitrust and trade policy away from what she characterized as a “narrow” focus on consumer welfare. (These remarks are available on the USTR website.) According to Tai, “prioritizing and pursuing the consumer welfare standard in competition policy” has “stifled competition and diminished economic liberty” (see Tai Remarks at 2). In trade, she said, “the pursuit of efficiency and low costs above all else has led to vulnerable and high-risk supply chains.” The Biden administration’s focus therefore has moved “from [trade] liberalization and the pursuit of efficiency and low costs,” to using trade negotiations to raise labor and environmental standards abroad.
Singham and Abbott would likely beg to differ with Ambassador Tai. In their view, trade liberalization increases global welfare by limiting inefficiencies and market distortions and optimizing consumer welfare. This, they say (at p. 7), “is the fundamental lens through which all those involved in the trade policy world should view the issues.” Significant trade liberalization that successfully addresses anti-competitive market distortion results in more jobs and better access to external markets for U.S. farmers and businesses. The authors explain and defend competition law enforcement policies based on the principle of promoting consumer, rather than producer, welfare. They do a good job of noting how certain recent and possible changes could harm innovation and welfare.
While Ambassador Tai argued in her speech that U.S. labor has suffered because of consumer welfare-based trade policy, Singham and Abbott would likely note that workers are consumers too, and that a protectionist trade policy diminishes the welfare of everyone in the economy, including workers. They set the stage for this argument in the opening chapter of their book, which includes an engaging discussion of the 19th-century British Corn Law, which was a system of tariffs protecting England’s corn farmers. The enactment of the Corn Law was greeted by riots. According to protesters, the Corn Law represented a “cruel and oppressive conspiracy” among landowners and politicians “to extort from the industrious labourer and mechanic, through the very bread they eat, an immense proportion of taxes.” Food prices were driven so high that the domestic manufacturing market declined, and unemployment increased. One of the founders of the Anti-Corn League explained:
“We do not seek free trade in corn primarily for the purpose of purchasing at a cheaper money rate; we require it at the natural price of the world’s market, whether it become dearer with a free trade (…) or whether it is cheaper (…) [W]e are convinced that [free trade in corn] will enlarge the market for the [farmer’s] labour, and give him [the] opportunity of finding employment, not only from the [land, but also from opportunities in towns].”
There is one issue, however, as to which Singham and Abbott would likely agree with the U.S. Trade Representative. That is with respect to the threat to U.S. economic and national security that is posed by anti-competitive market distortions perpetuated by China and other non-market economies. In the authors’ view, government-imposed anti-competitive market distortions (ACMDs) have replaced tariffs as the most pernicious and difficult-to-address threat to global welfare.
Singham and Abbott recommend a set of “workstreams” they believe policymakers should implement as soon as possible. Their first recommendation is to obtain broad acknowledgment of the problem, beyond jurisdictions like the United States, the UK, the EC, and Japan.
Second, solutions need to be found, both offensive and defensive. In this regard, Singham and Abbott offer as a possible offensive solution a proposed Anti-Competitive Market Distortions Chapter for inclusion in trade agreements. Among other things, each party would develop mechanisms to deal with the other party’s ACMD, which might include the imposition of duties correlated with the scale of the ACMD’s impact on competition. In addition, the parties would agree to employ these mechanisms with respect to other jurisdictions as well and to mutually defend any claims that such mechanisms violate WTO rules. Singham and Abbott also suggest defensive trade remedies, such as allowing governments to tarifficate ACMDs in trading partners’ markets (that is, to convert non-tariff barriers to tariffs). They propose such tariffication as a more nuanced approach to issues like the U.S.-China trade dispute. In general, they reason that such an approach would incentivize the offending country to reduce its ACMDs to obtain the benefit of lower tariffs. At the same time, countries imposing the tariffs would be signaling to trading partners that they are open to efficiently produced imports because of their contribution to consumer welfare.
Third, solutions depend on being able to measure the effects of ACMDs. The authors themselves engaged in some early work on this with others. They discuss this work and recommend that it be further developed.
Fourth, once the costs of ACMDs and their wealth-destructive effects can be made explicit, there needs to be a broad political consensus to attack them. The authors recognize that this is a tremendous task that needs to overcome the vested interests of those who benefit from ACMDs. However, they offer (at p. 463) a sobering assessment of the cost of failure: “[O]ver this next 50-year period, the new axis countries of China (strengthened by the potential additions of Hong Kong and Taiwan) and a greater Russia (embracing many regions containing Slavic peoples) will start to dominate new technologies such as quantum computing, space and Artificial Intelligence. However, this is not inevitable if the West deals with these pressing problems now. It is outside the scope of this book to set forth all of the other ways in which such a world can be avoided, and that the network of liberty can be enhanced and extended. But reducing market distortions around the whole world will be an essential part of this agenda.”
Last but not least, another key part of this ambitious book is its discussion of the role of property rights in maximizing consumer welfare and the importance of antitrust and trade rules that lead to the protection of intellectual property rights, in particular (see chapters 10 and 11). Singham and Abbott provide a thorough discussion of the history and reasoning behind the antitrust and trade treatment of intellectual property rights, along with specific consideration of issues in the IP-centric pharmaceutical industry. Among other things, they address arguments that patent protection leads to overly high prices for drugs and the damaging effects on innovation of parallel trade and compulsory licensing policies.
On the whole, this book offers a comprehensive, thoughtful, integrated treatment of the interrelationship of trade, competition law and intellectual property policy and market distortions that can occur across the three areas. It is an important read for anyone contemplating the challenging issues of trade and economic security in an increasingly complicated and volatile world.
Reprinted from Concurrences, September 2023. The original is available here.